Five questions answered on four rail firms taking one government to court

Rail firms start legal action.

Four rail firms today have started legal action against the government over the cancelling of the Great Western rail franchise. We answer five questions on the current legal proceedings.

Which train companies are taking the government to court?

FirstGroup, Stagecoach, Arriva and National Express have all gone to court in a bid to claim compensation from the government.

What exactly do they want compensation for?

In January, the government cancelled the Great Western bidding process after it said it wanted to revaluate it after the collapse of the West Coast mainline a few months before.

Cancellation of the bidding process was a big blow for the train companies who would have spent about £10m on the process, hiring large teams of experts and lawyers to put together their bids.

How much could the train companies get as a pay out?

It is believed it could cost the government about £40m.

However, the BBC are reporting that a ‘stay’ period has been established  in the legal proceedings until the end of March allowing both sides to come to a compromise.

Ministers are currently compensating bidders who lost out on a defunct West Coast deal.

What are industry insiders saying?

Nigel Harris, the editor of Rail Magazine, speaking to the BBC said: "A refusal to refund may conform to the letter of the contract rules but utterly fails the 'right thing' test.

"It makes no sense to penalise innocent bidders - especially when you want and need them to re-bid."

However, lawyer Patrick Twist at Pinsent Masons told the BBC:

"By lodging papers with the High Court the bidders are keeping open their ability to pursue the Department for Transport for the costs they wasted on bidding for the cancelled Greater Western franchise procurement," he said.

"The department will strongly resist any claim and the same bidders will have the opportunity to rebid when the franchise is reprocured. So it would be surprising if this really does lead to litigation."

What is the government saying?

The government has come under increasing flak for messing up the process, which they have already spent £50m on.

Here is what Transport Secretary Patrick McLoughlin said earlier in the year: "In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, the secretary of state does not believe it would be appropriate to reimburse bidders."

Photograph: Getty Images

Heidi Vella is a features writer for

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.